On Thursday, Intel Corporation (INTC) reported its earnings for the third quarter, revealing a complex financial landscape that includes both challenges and opportunities. Despite reporting a loss of $0.46 per share and revenue of $13.28 billion—surpassing revenue expectations but falling short on earnings per share due to impairment charges—the stock surged more than 5% on Friday. This increase reflects a positive outlook for the fourth quarter and stronger-than-expected performance in the data center segment.
For the third quarter, Intel's loss of $0.46 per share contrasted sharply with analysts' expectations of a loss of only $0.03 per share. The reported revenue of $13.28 billion also exceeded the anticipated $13 billion. However, this performance marks a decline from the same quarter last year, when Intel achieved earnings of $0.41 per share and revenue of $14.1 billion.
Looking ahead, Intel provided guidance for the fourth quarter, projecting revenue between $13.3 billion and $14.3 billion. While this range is slightly below Wall Street's expectation of $13.6 billion, the company’s optimistic tone resonated positively with investors.
A notable highlight from the earnings report was the data center and AI segment, which generated revenue of $3.35 billion, significantly exceeding the $3.1 billion forecasted by analysts. Conversely, the Client Computing segment, which encompasses chip sales for laptops and desktops, reported revenue of $7.3 billion, falling short of the expected $7.4 billion and declining from $7.8 billion in the same quarter last year.
Intel's Foundry division, responsible for manufacturing chips for Intel and external clients, recorded $4.35 billion in revenue, just below the anticipated $4.4 billion. This division's performance reflects the ongoing challenges Intel faces in maintaining competitiveness in the semiconductor manufacturing market.
Intel’s announcement of acquiring two new customers for its advanced 18A processor has contributed to a more favorable outlook. Additionally, agreements with major clients such as Amazon Web Services (AMZN) and Microsoft (MSFT) for custom chip manufacturing underscore Intel's efforts to bolster its foundry services.
However, the company is grappling with significant challenges, including reports of issues with the 18A chip manufacturing process and the cancellation of a potential partnership with Waymo to supply chips for self-driving vehicles. These setbacks are part of Intel's broader struggle with a protracted decline in PC chip sales, which has only recently begun to show signs of recovery amidst fierce competition from AMD.
In response to market dynamics, Intel has launched its second-generation Core Ultra chips, specifically designed to handle AI tasks and improve battery efficiency, positioning itself against Qualcomm’s Arm-based chips. Historically, Intel’s laptop processors have been criticized for their energy consumption, a factor that influenced Apple’s decision to transition to its own Arm-based chips, which offer improved power efficiency. The introduction of the new Core Ultra chips aims to address these concerns by providing similar performance levels while consuming less power.
Despite the challenges outlined in its third-quarter report, Intel's optimistic guidance and strategic moves to innovate within the semiconductor space are fostering a positive market reaction. The recent stock surge indicates that investors are willing to look beyond immediate losses to the potential for growth as Intel adapts to changing market conditions and seeks to regain its competitive edge in the technology landscape. With a critical focus on the Client Computing sector and ongoing enhancements in its product offerings, Intel remains a significant player in the industry as it navigates the complexities of the current market.
Your company made the obvious move and migrated to the cloud – Amazon Web Services, Microsoft Azure, or Google Cloud Platform. Months later, the attractive glow of the move from CapEx to OpEx spend has been dimmed by the reality of increasing monthly cloud bills. As the CFO, you want to know what’s up.
This is a real challenge, according to the head of infrastructure at a mid-sized software company we spoke with recently. Let’s call him Steve.
“I need to reduce my AWS costs as quickly as possible,” Steve told us. “My CFO saw that our AWS spend started at $20k per month when we migrated last year. Now it’s over $100k per month, which makes it one of our biggest IT-related line item expenses. We’re under a direct mandate: We have to bring it down.”
The problem is clear. But how did it get so bad, so quickly?
Your infrastructure is probably exploding
“As we started to dive into it, we found that a large part of our cloud spend is wasted on idle compute services,” Steve said. “With the rapid growth in our AWS use, we didn’t have visibility and policies in place to govern and control costs. Our developers aren’t properly cleaning up after themselves, and resources aren’t being tracked, so it’s easy for them to be left running. It’s something we want to change, but it takes time and energy to do that.”
This is a familiar story for many enterprises, large and small, as they migrate to the public cloud for increased agility and to speed up product innovation. But sometimes, the other side of the “agility” coin is a lack of defined processes and controls, which leads to waste.
As Steve put it, “AWS built this awesome playground – everyone can play, but everything costs money.”
To that end, AWS is now a $14 billion dollar per year run rate business, according to GeekWire. This is partly from their rapid gain in customers – and partly due to each of their customers spending more and more each month in their massive playground. And Azure and GCP are growing triple digits year-on-year (neither Microsoft nor Google break out revenue from their cloud revenue).
Enter the problem of cloud waste – servers left running when people are not using them, such as at night and on weekends, oversized databases and servers not optimized for the applications they support, and storage volumes not being used or “lost” in the cloud. These are just a couple examples – there are many more.
Let’s break down the numbers to see how big the cloud waste problem really is. In 2016, the total IaaS market was $23B:
So, we calculate that enterprises can save up to $6 billion by optimizing their public cloud spend. By 2020, that number grows to $17 billion.
Get Costs in Control
There’s no need to wait if you’re the CFO. Go talk to your IT and Infrastructure teams and get tools and policies in place to control your cloud costs now:
For non-production servers, the simplest way to do this is with a scheduling tool that allows you to set automatic on/off schedules, like ParkMyCloud. It’s an immediate win: you can save 20% or more on your next cloud bill.
Talk to your Development and Operations teams today about getting cloud costs optimized and in control. It’s time.
For more information, please go to: http://www.parkmycloud.com/
